The Economic Impact
By James Stout, Former
writer for BarterNews
Barter affects the economic system.
Bartering is fundamentally a personal activity --
one-to-one, you and me getting what we want. But when
millions of people are bartering, it becomes more than just
an individual action; it becomes a supplemental economic
system, which both complements and alters the macrocosmic
system. We can see this effect in various ways:
- It allows us to
be less reliant on the job market. To acquire goods and
services, we usually need money, which is usually
acquired through a job. (If we want more goods
and services, we usually have to get a high-paying
job.) But when we barter, each trade is a "job" in
itself; we become a businessperson who generates goods
and services which we would have bought with the money
from a job. Therefore:
- We can
accept a lower-paying job which we enjoy, and make
up the difference by bartering. This lower-paying
job can even be a part-time job.
- We can
stay at a lower-paying job which we enjoy,
instead of climbing a stressful corporate ladder.
of our income level, we can supplement it by
moonlighting with bartering. Instead of watching
television in our free time, we can barter our
services -- or our goods, which could be the
handicrafts from a pleasant hobby.
- Bartering is
not as susceptible to inflation. Consider these
might raise the price of everything else, but if we
agree that your rototilling equals my carpentry,
that's that. Two hundred years ago, we might have
been able to trade an hour of tutoring for a large
bag of garden vegetables. The cash price
might have been 5 cents for either one. In our
current era, the tutoring might cost 400 times that
much ($20) and the vegetables' price could have
inflated by that same amount. But the barter deal
would be exactly the same.
is not totally inflation-proof.
Inflation can occur within a barter club when
some members start to add special charges (in
units) when selling to the other members. (Many
clubs prohibit this practice.)
service charges and other fees in barter clubs
might be considered inflationary; we must raise
our prices in order to cover those extra costs.
Inflation can happen within a barter club's
economic system because it is associated with
the money-based economy. When prices rise in the
money-based economy, they also rise in a
unit-based barter club; for example, when a $500
TV set inflates to $600, the barter-club members
must then pay 600 units to buy it.
Inflation might occur in a community's economy
when a new barter club introduces its money
supply in the form of units. If the club creates
hundreds of thousands of dollars worth of units,
the effect would be the same as if it had
introduced the same amount of dollars.
- Bartering has a
different dynamic in "supply and demand." If the shovel
manufacturers of the world unite and suddenly produce
enough shovels to give 100 of them to everyone, there
would be no effect on the value of our shovel in
terms of its ability to dig potatoes. (Try doing a
similar saturation with $100 bills, and see how their
value is affected.) Of course, if we try to trade
that shovel, we will find that it has no value as a
medium of exchange, since everyone has 100 of them.
allows businesses to sell goods and services to
cash-poor customers. We can see barter's influence
wherever a barterer is placing an extra order for farm
supplies, filling an empty table at a restaurant, or
joining a telephone-answering service which had been
going broke. Bob Murley of Full Circle Marketing
explained that some excess production capacity can as
good as money: ''Everybody who produces something has a
greater capacity to produce more of the same thing than
to get something new or to create something new. So if a
man is manufacturing tennis rackets, he can produce
another thousand tennis rackets easier than he could go
out and create a cruise for himself or advertising space
for himself or travel credits for himself. So excess
production is a tradable, barterable commodity."
- When we can
pay for some goods and services by bartering, we
might not need to borrow as much money.
clubs lend their units. This is an additional line
of credit for us.
provides an additional "safety net." Non-profit barter
clubs provide a means by which cash-poor people can
acquire the necessities of life -- food, housing,
clothing, etc. When I worked at a non-profit barter
club, I saw people who were in severe financial distress
-- not knowing where they would find their next meal. We
were usually able to help those people. While bartering
assists the people, it also makes them less dependent
upon taxpayer-supported government programs, e.g.,
welfare and food stamps.
- It creates
micro-economic systems. Indeed, the sheer magnitude
of the macro-economy could be one of its problems.
Theodore Rosjack said, in the introduction to E. F.
Schumacher's book, Small is Beautiful, "...
whether the bigness is that of public or private
bureaucracies ... from bigness comes impersonality,
insensitivity, and a lust to concentrate abstract
power." It is easier to accumulate (and abuse) assets
and power in a money-based system than in a
direct-barter system; however, bartering, too, can be
used to amass wealth, particularly in a field like
real-estate exchanges. And "small" is not always
"beautiful"; sometimes it is weak and inefficient, as
demonstrated by some barter clubs and by the difficulty
in setting up one-to-one trades as a way of life.
- It provides a
basis for the re-definition of money and economics. Some
people believe that bartering is a philosophical
challenge to our money-based economic system. These
people create barter clubs which are decentralized,
operated by members of the community, and guided by
idealistic motives. Some of them try to transform
economic values by making all labor equal: Your hour of
work equals mine, even though you are a doctor and I am
a window-washer. Paul Fink of the Community Skills
Exchange in Olympia, Washington, expressed a
far-reaching philosophy on bartering in a letter to me.
He said: "I find barter books much too apolitical. Our
Community Skills Exchange is based on an end to: the
monetary system, hierarchy of wages, an unequal social
employer/employee relationship, centralization of
production and service, specialization of individuals,
and labor as merely an 'economic' exchange. Our
organization attempts to teach people how to take charge
of their own lives and once again feel powerful. As far
as we're concerned, empowerment is the focal issue." The
idealistic barterers are presenting interesting ideas
about commerce and money. They give their organizations
names like "Skills Bank" and even "Energy Bank," as
though assets and money are taking on a different
meaning to these people. The skills and energy of the
community are indeed stored there -- in a form which can
be more real and directly usable than cash.
Does bartering have a place in a
healthy economy? The popularity of bartering has risen and
fallen throughout history as national economies have become
depressed or prosperous. In the 20th century, we saw an
increase in bartering during the U.S. depression of the
1930s, and in post-World-War-II Europe. Bartering became
popular again during the extended recession of the early
1980s in the US. When the economy is in good condition,
people would rather spend their abundance of cash -- but
when inflation is high, and many people are unemployed, and
cash is less available, people want to barter. However,
bartering might have found a permanent place in a healthy
economy, for these reasons:
barter clubs. These clubs do not rely on one-to-one
trades; instead, they use a computerized system of
"units" which make bartering almost as easy to use as
money. The clubs are printing their own checks, issuing
their own credit cards, distributing their own scrip,
making loans with interest, and providing other
alternatives to the money-based economy.
- Lack of faith
in the economy. We are in a world of corporate
restructuring, down-sizing, rapidly changing industries,
periodic recessions, a high rate of bankruptcy, and
other changes -- and the ever-present possibility that
the entire system could collapse someday. In this world,
bartering gives some stability; we can barter regardless
of the condition of the general economy.
respectability. Although some corporations (and
individuals) hesitate to barter because the activity
still carries some of its stigma as a sign of poverty
and distress, it is coming into the mainstream as a
smart way to do business, even when our finances are
- Bartering will
always be popular in its personal forms -- in the trade
of our turnips for a neighbor's banana bread, and the
trade of our kid's marbles for another kid's toy. In
those situations, barter is not determined by economic
conditions; it is a ritual and an expression of
friendship -- and it is a natural, deep-rooted part of
our heritage and humanity.